AHC Group

EHS governance: Responding to crisis at Ashland

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Courtesy of AHC Group

When Ashland 'got religion' in 1988, it provoked serious and valuable reform to rebuild public confidence that improved performance and instilled a culture of environmental responsibility in the organization.

THE BEGINNING

January 2, 1988, is the day that some people say that Ashland 'got religion.' I will never forget the news flash on CNN that an oil spill had occurred on the Monongahela River just south of Pittsburgh. At 5:30 P.M. that Saturday night, a tank at one of our storage terminals had collapsed catastrophically while being filled, releasing 3.9 million gallons of diesel fuel in a tidal wave that shot over the walls of the containment dike. As the hours unfolded, we learned that 750,000 gallons of fuel had escaped — via a storm sewer on an adjacent parking lot — into the river, threatening the drinking water supply of communities as far downstream as Cincinnati, Ohio.

I remember mentioning to a colleague that 'aftershocks' would be felt throughout the company in ways that we could only imagine. This is not to say that we didn't take our compliance responsibilities seriously before this event. But, like most other companies at the time, we didn't look much beyond the obvious. Our initial response was to take responsibility, clean up the mess, find out what happened and why, and take steps to prevent such an event from happening to our company again. And that's what we did in what has been hailed as a classic case of effective crisis response. More importantly, however, the 1988 event changed the way we did business and remains a landmark in our company's 78-year history.

Unfortunately, sometimes an event like this one has to happen to focus the spotlight on EHS governance.

THE STARTING POINT: NEEDS OF THE BOARD

There is no question that one model does not fit every corporation. Every company has a different EHS profile that is shaped by its operations, the importance of environmental activities to management, and the culture of the company. Board members share one thing in common across all companies: All directors are concerned with the interest of the shareholder. While directors are not appointed to manage companies, they are there to inquire into policies and to set the standards by which the management is measured. Therefore, directors expect to be informed about environmental risks and liabilities, environmental compliance, and key issues facing the company.

A survey conducted by A.D. Little for the National Association of Corporate Directors in 1995 found that corporate boards have seven informational needs concerning EHS. These are:

  • Company's environmental risks and liabilities
  • Environmental compliance status of the company
  • Key environmental issues facing the company's industry
  • The company's environmental performance
  • The company's progress in reducing its environmental impacts
  • The company's environmental policies, systems, programs and practices
  • The company's performance vis-à-vis peer companies

I would suggest that these seven needs remain the key ones today; however, in 2002 some things have changed. Boards now want to see more robust performance goals set and achieved as well as much more information about product risk. The latter will obviously differ from company to company.

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